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PG&E seeks 12.6 percent rate hike for natural gas customers

By George AvalosOakland Tribune

Posted:
12/19/2013 11:39:45 AM PST

Updated:
12/19/2013 10:00:34 PM PST

SAN FRANCISCO -- In a controversial move, PG&E on Thursday requested a nearly 13 percent rate increase for its residential natural gas customers to help finance upgrades of its pipeline system -- the same day state regulators slapped the utility with a $14 million fine for blunders related to its gas pipeline in San Carlos.

PG&E critics immediately lambasted the proposed rate hike, accusing the utility of trying to burden its customers with its past failures to adequately maintain its pipelines. Those pipelines came under scrutiny following the deadly 2010 pipeline blast in San Bruno, for which PG&E faces fines of up to $4 billion.

"The question is why does PG&E want more and more, when they have failed to make the natural gas system as safe as it should be with the money it has already received?" said Mindy Spatt, a spokeswoman for The Utility Reform Network, a consumer group. "This is going to hit people quite hard."

PG&E spokesman Jonathan Marshall said customers "will see a rate increase of about 12.6 percent in 2015, if this is approved."

Under the proposed hike, the current average residential natural gas bill of $41.53 a month would rise to $46.76. That average is based on use of 34 therms a month of gas.

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San Francisco-based PG&E's latest rate request comes even before the California Public Utilities Commission has ruled on a prior rate increase request. A final decision on the prior request is expected early next year, and it would take effect soon after approval.

Spatt said if both rate increases are approved, the average residential gas customer would see an $18 increase, or 43 percent more than they currently pay.

"Our plan to invest in 21st century infrastructure will serve customers by helping PG&E become one of the safest and most reliable gas utilities in the country," said Nick Stavropoulos, PG&E's executive vice president for gas operations.

The cost of upgrading PG&E's natural gas system in the wake of the San Bruno blast, which killed eight people and destroyed 38 homes, was one of the reasons cited for the requested rate hike.

"Testing pipelines to verify safe operating pressures, replacing older pipelines, installing more valves and inspecting the interior of more pipelines" are among the upgrades and improvements linked to the request for higher rates, PG&E said in its filing.

PG&E said it needs $1.29 billion a year in revenue for the gas transmission and storage system, which is $555 million above the current revenue level of $731 million.

But critics responded that many of the upgrades PG&E identifies as future expenses should already have been done.

"There are some very difficult political issues for the PUC to decide," said Severin Borenstein, co-director of the University of California Energy Program. "How much should PG&E be allowed to recover and how much will be disallowed because that work should have been done already."

The latest rate request comes at a time when natural gas prices have been falling. Yet natural gas customers haven't fully felt the benefit of falling retail prices because about half the costs of operating a natural gas system is in the pipelines, said Borenstein.

In a separate but related matter Thursday, the PUC voted 5-0 to allow Line 147 in San Carlos to operate at a maximum allowable pressure of 330 pounds per square inch, after having been shut down for safety concerns.

The ruling was ripped by San Carlos Mayor Mark Olbert, who complained that "PG&E and the PUC continued their sad tradition of placing service above safety. The official review process was nothing more than a charade."

Prior to the vote, PUC Commissioner Michael Florio said he and his colleagues faced a "balance of risks."

"If we open Line 147 to 330 psi, there is always some risk that something could go wrong," he said. "On the other hand, if Line 147 is not in operation, we have the potential for any number of components on the Peninsula to fail unexpectedly and potentially cause a loss of gas service" in San Francisco.

Moments later, also in a unanimous vote, the PUC levied a $14.35 million fine on PG&E in connection with the San Carlos pipeline because it violated the PUC's rules about keeping the commission properly informed about the flawed records.

"This penalty is to serve as a deterrent against similar future behavior," PUC Commissioner Mark Ferron said.